Rona's shares soar on takeover offer

Rona executives say they’re not interested in a $1.76 billion takeover offer from rival home improvement chain Lowe’s, but shareholders of the Quebec-based company are betting it might happen anyway. Share’s of Rona are up nearly 20 per cent in early trading Tuesday morning at $14.10. Rona said before markets opened that it had received an informal offer from Lowe’s of $14.50 on July 8, but that its board had decided Rona “should remain focused on executing its business plan with a view to capturing significant opportunities that it sees for its business.”

Quebec’s government also seems keen on blocking any hostile takeover, or at least squeezing more cash out of Lowe’s. The province’s minister of finance, Raymond Bachand, released a statement that highlighted Rona’s importance to the Quebec economy. “This transaction does not appear to be in the interests of either Québec or Canada,” Bachand said.

Analysts had been speculating for months that Rona was ripe for a takeover. Its share price was depressed and its network of nearly 800 stores (operating under various banners), as well as 14 hardware and construction distribution centres, represented an attractive target for Lowe’s, which only has about 31 stores in Canada. By contrast, Home Depot, another U.S.-based chain, has about 180 stores north of the border.

Lowe’s isn’t likely to be deterred. Canada has become a key battleground for U.S. retailers in recent years thanks to our relatively strong economy and hot housing market, the latter of which is particularly attractive when you’re in the business of selling building materials and major appliances.